Gen Z's Spending Pullback Expected to Reduce Holiday Sales by 5%

What's Happening?

Gen Z consumers are planning to significantly reduce their holiday spending by nearly 25% this year, according to PwC's holiday outlook. This marks a stark contrast to the previous year when their spending increased by 37%. The anticipated reduction in spending by Gen Z is expected to lead to an overall decline in holiday sales by 5%, marking the first drop since 2020. In contrast, older generations such as Millennials, Gen X, and Baby Boomers are either maintaining or slightly increasing their holiday spending plans. The report highlights that Gen Z's financial obligations, including student loans and family responsibilities, are influencing their spending habits. Additionally, Gen Z is characterized by a different attitude towards consumption, prioritizing value and affordability, often seeking secondhand items and dupes.

Why It's Important?

The shift in Gen Z's spending behavior is significant as it could impact retailers and the broader economy. Retailers may need to adjust their strategies to cater to Gen Z's preference for value-driven purchases, potentially focusing on affordable collaborations and unique offerings. The decline in holiday sales could affect businesses reliant on seasonal revenue, prompting them to explore new ways to attract budget-conscious consumers. Furthermore, the trend reflects a broader generational shift towards smart shopping and budget stretching, which could influence market dynamics and consumer expectations in the long term.

What's Next?

Retailers are likely to respond by offering discounts and sales outside traditional holiday periods to meet consumer demand for value. This strategy may include early promotions and unique shopping experiences to attract Gen Z consumers. Additionally, the trend of seeking less expensive alternatives is expected to continue into 2026, with 84% of consumers planning to cut back due to rising prices and economic pressures. Retailers may need to innovate and adapt to these changing consumer behaviors to maintain competitiveness and profitability.

Beyond the Headlines

The shift in spending habits among Gen Z could have deeper implications for the retail industry, including a potential increase in the popularity of thrifting and secondhand shopping. This trend aligns with Gen Z's values of sustainability and affordability, which could drive changes in retail offerings and marketing strategies. Moreover, the emphasis on value and smart shopping may influence other generations, leading to a broader cultural shift towards frugal consumption and financial prudence.